1. Introduction
The role of a company secretary is an important component of corporate governance and regulatory compliance. Under the existing Companies Act, 2063 (2006) (“Companies Act”), the appointment, qualification, functions, duties and powers of a company secretary are primarily governed by Sections 185 and 186. The existing framework, however, largely focuses on the mandatory appointment of a company secretary by companies meeting a prescribed paid-up capital threshold and on the functions to be performed by the company secretary.
The proposed Company Bill (“Bill”) seeks to substantially expand and restructure this framework. In particular, the Bill proposes to broaden the categories of companies required to appoint a company secretary, introduce additional eligibility requirements, prescribe a specific period within which the position must be filled, and provide more detailed statutory functions and responsibilities. It also introduces a specific provision concerning the determination of remuneration of company officers and employees, including the chief executive officer.
This article highlights the principal differences between the existing framework under the Companies Act and the provisions proposed under the Bill.
2. Appointment of Company Secretary
Under Section 185(1) of the Companies Act, a company with paid-up capital of NPR 10 million or more is required to appoint a Nepali citizen meeting the prescribed qualifications as its company secretary. The existing provision therefore primarily uses the company’s paid-up capital as the threshold for determining whether appointment of a company secretary is mandatory.
The Bill proposes a considerably broader framework. Under Section 167, appointment of a company secretary would be mandatory for:
- securities-market-listed companies;
- public and community companies;
- government companies;
- companies in which the Government of Nepal, a Provincial Government or a Local Level holds 25% or more shares; and
- private companies having paid-up capital of NPR 500 million or more.
The Bill further provides that a company having paid-up capital exceeding NPR 50 million but less than NPR 500 million may, where necessary, assign company secretarial responsibilities to a person possessing the qualifications prescribed for a company secretary.
Accordingly, the Bill moves away from the existing single paid-up capital threshold and introduces a company-type and ownership-based approach, while retaining a capital-based threshold for private companies.
3. Qualification and Eligibility
Section 185(2) of the Companies Act permits a Nepali citizen to be appointed as company secretary where the person either:
- has obtained a professional certificate of company secretary from an authorised domestic or foreign body and has worked in the relevant field for at least two years; or
- has obtained at least a bachelor’s degree in law, management, commerce or economics and has worked for at least three years in the relevant field or in company management.
The Companies Act also expressly provides that a director of the concerned company cannot be appointed as its company secretary.
The Bill proposes to retain the requirement of relevant academic qualifications and experience, while restructuring the eligibility framework. Under Section 168, a person with at least a graduate-level qualification in law, management, commerce or economics and qualification or experience in company management or a related field may be appointed as company secretary.
More significantly, the Bill expressly identifies additional circumstances in which a person would be disqualified from being appointed or continuing as a company secretary. These include persons:
- convicted of specified serious offences, including corruption, rape, human trafficking and narcotics-related offences;
- convicted of money laundering, passport-related offences, kidnapping or criminal offences involving moral turpitude;
- blacklisted under prevailing law, or whose removal from the blacklist occurred less than three years previously;
- who are not Nepali citizens; and
- who are directors of the concerned company.
The Bill therefore provides a more detailed statutory framework for both qualification and disqualification, whereas the Companies Act principally sets out the qualification criteria, nationality requirement, and prohibition on appointment of a director of the concerned company.
4. Multiple Appointments and Parent-Subsidiary Companies
Both the Companies Act and the Bill restrict an individual from simultaneously serving as company secretary of more than one company. Section 185(4) of the Companies Act provides an exception permitting the company secretary of a principal company to also be appointed as company secretary of its subsidiary.
The Bill retains this parent-subsidiary exception. Accordingly, the Bill does not fundamentally alter this aspect of the existing framework.
5. Authority to Appoint and Vacancy of the Position
The Companies Act does not prescribe a specific period within which the position of company secretary must be filled. Instead, Section 185(5) provides a mechanism for dealing with situations where the position is vacant or where the incumbent company secretary fails or is unable to perform a required function. In such circumstances, a qualified employee designated by the Board may perform the relevant function in the capacity of company secretary.
The Bill proposes a more definitive approach. Section 167 provides that the Board of Directors shall have the authority to appoint the company secretary. It further provides that the position of company secretary cannot remain vacant for more than six months.
The proposed six-month limitation introduces a specific statutory obligation to fill the position within a prescribed period. This is a notable departure from the existing Act, which provides a mechanism for performing company secretarial functions during a vacancy but does not prescribe a maximum period for which the position may remain vacant.
6. Functions, Duties and Powers
Section 186 of the Companies Act sets out the functions, duties and powers of the company secretary. Among other matters, the company secretary is responsible for implementing or arranging implementation of decisions of the Board and general meeting, complying with directions of the Office of Company Registrar or other concerned bodies, and submitting returns, documents and decisions required under law within the prescribed period. The provision also includes functions relating to convening meetings, preparing agendas, maintaining and authenticating records, and dealing with claims, complaints and grievances of shareholders and debenture holders.
The Bill retains these core responsibilities but sets them out in greater detail under Section 169.
Under the Bill, the company secretary would specifically be responsible for:
- submitting statutory returns, documents and decisions within the prescribed period;
- coordinating with the chairperson and managing director or chief executive officer for convening Board, general and special general meetings;
- preparing agendas and circulating them to relevant directors or shareholders;
- maintaining, certifying and taking custody of records of Board and general meeting decisions;
- coordinating with the managing director or chief executive officer concerning notices to shareholders relating to share allotments and payment of share instalments;
- maintaining and certifying the register of shareholders and records relating to shareholders and debenture holders;
- placing matters relating to pledge, mortgage, transfer and cancellation of registration of shares or debentures before the Board or executive head;
- communicating claims, complaints, grievances, suggestions and advice received from shareholders and debenture holders to the relevant authorities and informing the concerned person of the action taken; and
- performing other functions assigned to the company secretary under the Act, memorandum of association or articles of association.
The Bill therefore provides a more operational description of the company secretary’s role.
7. Conflict of Interest and Professional Conduct
Both the existing Act and the Bill recognise the need to prevent the company secretary from using the company position for personal benefit. Section 186(3) of the Companies Act provides that, except pursuant to a decision of the general meeting, the company secretary must not undertake or cause to be undertaken any act through or from the company for the secretary’s own benefit. Section 186(4) further requires the company secretary to comply with prescribed conduct requirements.
The Bill retains these safeguards under Section 169. It provides that a company secretary must not undertake or cause to be undertaken any act through the company for their own benefit and must comply with the conduct prescribed by the company.
Thus, while the Bill expands the substantive responsibilities of the company secretary, the basic principle concerning professional conduct and avoidance of personal benefit is retained from the existing framework.
8. Remuneration and Salary
The Companies Act does not contain a specific provision under Sections 185 or 186 prescribing the salary or remuneration of a company secretary. The existing Act contains separate provisions concerning remuneration and benefits of directors and other corporate personnel, including provisions relating to disclosure of remuneration and benefits.
The Bill introduces a more explicit framework under Section 170. It provides that the salary and remuneration of company officers and employees, including the chief executive officer, shall be determined by the general meeting.
In the case of public companies, the determination of such salary and remuneration is further required to take into account, among other matters, the net profit of the previous financial year.
This provision therefore introduces a more direct statutory connection between remuneration determination and the company’s financial performance, particularly in relation to public companies.
9. Overall Changes Proposed by the Bill
The proposed framework under the Bill represents a significant expansion of the statutory role of the company secretary. The principal changes may be summarised as follows:
| Issue | Companies Act | Proposed Company Bill |
| Mandatory appointment | Company with paid-up capital of NPR 10 million or more | Listed companies, public and community companies, government companies, companies with 25% or more government ownership, and private companies with paid-up capital of NPR 500 million or more |
| Intermediate private companies | No corresponding specific provision | Companies with paid-up capital above NPR 50 million but below NPR 500 million may assign company secretarial functions to a qualified person |
| Qualification | Professional certificate + 2 years’ relevant experience, or bachelor’s degree + 3 years’ relevant/company management experience | Academic qualification in specified fields together with qualification/experience in company management or related field |
| Nationality | Nepali citizen | Nepali citizen |
| Disqualifications | Director of concerned company; other eligibility requirements under Section 185 | Express additional disqualifications, including specified criminal convictions, blacklisting and non-Nepali citizenship |
| Multiple appointments | Generally prohibited, subject to parent-subsidiary exception | Same parent-subsidiary exception retained |
| Vacancy | Qualified employee may perform functions where position is vacant | Position cannot remain vacant for more than six months |
| Functions | Prescribed principally under Section 186 | More detailed and specific statutory functions under Section 169 |
| Personal benefit | Prohibited except as authorised by general meeting | Similar prohibition retained |
| Conduct | Must comply with prescribed conduct | Must comply with conduct prescribed by the company |
| Remuneration | No specific company-secretary remuneration provision under Sections 185–186 | General meeting to determine salary/remuneration of company officers and employees, including CEO; public-company remuneration to take previous year’s net profit into account |
Disclaimer: This article is for general informational purposes only and does not constitute legal advice, advertisement, personal communication, solicitation or inducement. No attorney-client relationship is created through this content. Gandhi & Associates assumes no liability for any consequences resulting from actions taken based on information contained herein.
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